Cameroon - The economy (Vol. 2 of 2) : Appendices

RESTRICTED 44; (, h g i SipV Report No. AF- 15a This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION THE ECONOMY OF THE FEDERAL REPUBLIC OF CAMEROON VOLUME II APPENDICES April 8, 1964 Department of Operations Africa  CONVERSION RATES 50 C FAF = 1 French franc 1 CFAF = 0. 4 U.S. 247 CFAF 1 $ U.S. 1 million CFAF = 4, 051 $ U.S. 1 L 1 US$ 1950 - August 31, 1957: CFAF 492 175 August 31, 1957 - Dec. 31, 1958: CFAF 590 210 after December 31, 1958: CFAF 685 247  APPENDIX I J. TRANSPORTATION 1. The past decade has seen sulbstantial improvement and expansion of the system of transportation of the Cameroon. During the period 19h7-1957, covered by the first two FIDES plans, an amount of 23 billion francs out of a total of some 36 billion was spent on infrastructure projects and, with the exception of the construction of the Edea Dam on the Senaga River and a number of steam generating stations, the greater part of this investment expenditure has been on transport facilities. Port facilities were modernized on a very substantial scale over a period of six years and the port of Douala as it now stands largely represents the outcome of this period of investment. Although there were no new additions to the railway network, considerable improvements, including conversion to diesel operation, have been made resulting in a reduc- tion in costs and increased traffic. In the case of roads, some 1,170 kilo- meters of new roads were constructed and a further 580 kilometers tarred. Amongst the large number of engineering works involved may be cited the con- struction of the Wouri Bridge with a total length of 1,805 meters. 2. In 1959, the contribution of the transport industry to the gross domestic product was estimated at only 3%, but this in no way measures the full economic contribution of transport to an export-oriented economy based on agricultural production of a widely dispersed population in a country with formidable physical obstacles to movements in addition to long distances. Port facilities may be rated as adequate for the needs of the country for the next five years, although the evacuation of produce from the West Cameroon via Tilco and the lighterage port of Bota is likely to remain expensive but unavoidable until overall port traffic requirements justify the development of a second deep-water port. This is likely to be accelerated by the comple- tion of the Trans-Cameroon Railway in the late 60's. International airport facilities appear to be adequate for the needs of the country. Apart from one or two minor developments and the major extension of the Douala-Yaound6 railway line into the Trans-Cameroon Railway, it is difficult to see any eco- nomic justification for further railway developments in the Cameroon. 3. The road netwiork, on the other hand, still falls short of meeting the immediate requirements of the economy. There are still significant gaps in the network of all-weather roads and only a very small mileage is tarred. Apart from the need to complete a minimum network, there is a growing need to consolidate and further expand the road transport facilities, and in particular feeder roads, on a scale commensurate with the size of the country, its population and the available natural resources. 4. A brief description is given of existing transport facilities in the following paragraphs, with some reference to present proposals for their expansion.  APPENDIX I -2- Seaports 5. Cameroon has five seaports handling a substantial volume of trade. Douala, situated at the terminus of Cameroon's railway system, is by far the most important port handling some 90% of the total cargo. Kribi, situated on the coast, relies on lighterage operation for ships lying in sheltered anchorage offshore. Bota, the principal port of entry of imports into West Cameroon, also handles the bulk of the exports from the west with the excep- tion of bananas aznd lumber which are exported chiefly through the special banana river port of Tiko. Garoua, a river port 900 midles from the sea on the Benoue River, which runs through Nigeria for all but the last stretch, handles much of the import-export trade in the northern part of Cameroon. 6. Douala has berths for 11 ocean-going ships. Seven of these berths situated along a quay 1,150 meters long can handle modern cargo ships drawing 27 feet of water. The other four berths are being modernized under a project sponsored by the European Economic Community (EEC), and will soon be brought up to the same standard. There are specialized facilities for handling petrol- eum, alumina and timber, but wharf cranes have not been installed and there appear to be technical difficulties to prevent this. Ample storage space, both open and covered, is also available. Douala's annual traffic capacity is estimated at 1,100,000 tons. It has operated at about 80% of capacity, and traffic has doubled in the period 1950-62. Completion of the improve- ments to the four berths in the process of being modernized is expected to increase the annual capacity of the port to 1.5 million tons. The total cost of this work, which is very much in arrears, is estimated at 1.2 bil- lion francs, to be financed by F.E.D. Across the Wouri River from the main Douala port installation are the Bonaberi banana docks with excellent facili- ties for handling banana shipments rapidly and efficiently. The approach channels to the port and especially in the stretch of river on which the port is situated are increasingly subject to silting, and dredging is likely to entail more and more expense. The work of dredging has hitherto been under- taken on a contractual basis but it is expected that costs will be reduced when a new dredge costing from 200 million francs CFA financed by F.E.D., is brought into operation. Other improvements envisaged under the Plan are esti- mated to cost a further 1.5 billion francs CFA. 7. The port of Kribi has a dock 140 meters long for lighters handling cargo for ships lying in sheltered anchorage 2 miles offshore and handles about 25,000 tons of traffic each year. The river port of Garoua on the Benoue 900 miles up from the river outlet on the Nigerian coast handles about 30,000 tens of cargo each year, mainly cotton exports and imported consumer goods, but is only navigable from July to October each year. 8. Bota is a ligbterage port handling about 50-60,000 tons of traffic per year to and from ships lying in the sheltered anchorage of the bay. The bay and a line of rocky islands running out at right angles to the coast pro- vide what appears to be a promising basis for developing a potentially large deep-water "avant-port" to Douala. Hydrological and other technical investi- gations are in progress and preliminary proposals for developing the port are under study. There does not appear to be any immediate need for a second port  APPENDIX I -3- of this capacity, but there is no doubt that any large increase in the tonnage of general merchandise carried by the Trans-Cameroon railway which might re- sult from the extension of the railway northward into the Chad, with possible road links with the Central African Republic, combined with the normal develop- ment of the Cameroon economy, could completely transform this picture in the course of 5-7 years. It has been estimated that the completed Trans-Cameroon Railway might provide almost double the present tonnage. This, combined t2ith the tonnages at present handled by Bota and Tiko, would provide an estimated two and a half million tons to be handled by Cameroon ports. 9. Any port development at Bota would seem to require also the con- struction of a first class road and railway between Douala and Bota, and it seems essential also that developments at Bota should be complementary to the installations at Douala, and that progress should be closely linked to the optimum operating efficiency of Douala. There would therefore be obvious advantages if the development of a new port at Bota could be undertaken in two or three different stages to be determined by the excess of the total port tonnages over the optimum tonnages to be handled by Douala. 10. Tiko is a river port situated well upstream in one of the many wandering arms of the estuary. Facilities have recently been much improved, and now include a wharf capable of handling ships up to 500 feet in length. Banana boats are loaded there and large timber logs are towed out by motor launch to ships in the channel. The port handles approximately 210,000 tons of traffic including some 120,000 tons of timber and 80,,000 tons of bananas for export. Unfortunately, the narrowness of the channel means that ships must be maneuvered singly and carefully in and out. 11. The ports are handled by the Regie des Ports, which operates as a public enterprise subject to governmental control. This organization has recently taken over the two ports of Bota and Tlko in West Cameroon, fornerly operated by the Cameroon Development Corporation. The Port Authority is re- quired to prepare an annual financial budget each year for submission to and approval by the Federal Assembly. ERailways 12. As in the case of ports, the state-owned, meter-gauge railway which carries over half of the merchandise transported within Cameroon, is operated as a separate public authority subject to general and financial control by the Federal Assembly. 13. There are only two rai:l lines, both extending outward from the main port of Douala. The northern line runs 100 miles to N'Kongsamba and the eastern line 200 miles to Yaounde with a branch line to N-Balrmayo. After years of deficit operation, locomotives were completely dieselized in 1958 and as a result the railway now operates at a small profit. Traffic on the Douala-Yaounde line is balanced; 275,000 tons moved in each direction in 1959. On the Douala-N'Kongsamba line, traffic is much heavier in the do-wnward direc- tion -- 125,000 tons moved toward the port while only 35,000 tons were carried inland.  APPENDIX I -4- 1h. The nuimber of passengers carried by the railways has shown only a marginal increase of barely 105, over the past 10 years. In the case of mer- chandise, however, this has more than doubled from 73 million ton/lcms in 1950 to 134 million in 1961/62. Cost of transport by railway averages 8.2 CFA francs per ton-kilometer. Special rates averaging only 6.8 CFA francs per ton-kilometer are applied to traffic to and from northern Came- roon. 15. IrWork is about to commence on the actual construction of the first 200 mile extension northward from Yaounde to Goyoum of the Trans-Cameroonian railway. This is part of a broader-based proposal to link the unlder-developed north to the more advanced south by extending the existing railway from Yaounde to N'Gaoundere, with a more indefinite proposal for a link between N'Gaoundere and Doba, and possibly also Fort Archambault, in the Chad. The limited ob-ec- tive of the Cameroon extensions is to reduce the cost of transporting merchan- dise to and from the north to 5 CFA francs per ton-kilometer as compared to current road cost of 14 CFA francs per ton-kilometer, and to open up and con- nect the north with the rest of the economy. Cost of the project (N'Gaoundere- Yaounde) is estimated at $55 million-$60 million, and time for completion about five years from commencement of construction. Funds have already been provided for the first section of the new railway from Yaounde to Goyoum in the amounts of $15 million contributed by F.E.D., $8 million by AID, and $6 million by FAC. The FAC contribution is mainly for the finance of permanent buildings and in- stallations other than the railway permanent way and purchase of railway equip- ment and rolling stock. 16. The Plan provides for an aiaoiunt of 1.4 billion francs to be spent on replacing existing 26 kg. rails by 30 kg. rails and the improvement and modernization of the railway, workshops, regional and communications system and stations, including the provision of housing for employees. 17. A further short extenision of the railway from Ibanga to Kumba in the West Cameroons is under consideration, construction of which is likely to be undertaken by the Railways. A rail link between Douala and any new pro- jected port at Bota would probably oecome essential only if port developments there are eventually undertaken. Roads 18. The road system maintained by the Government of East Cameroon tota'ls 5,900 kilometers. In addition, iocal governments maintain 6,100 kilometers of road, most of which is in use only during the dry season and there are another 17,000 kilometers of unclassified roads. Of the roads maintained by the State Government in the East, 630 kilometers are hard surfaced, L,180 kilometers are all-weather gravel roads, and 1,050 kilometers are secondary roads. The main north-south axis road link runs from Douala east through Yaounde and Nango- Eboko to Bertoua near the eastern frontier, and then north to N'Gaoundere, uaroua, and Maroua. It has a total length of over 1,500 kmi, of which only 150 km are hard surfaced. The other principal highway runs from Douala north to N'Kongsamba and then to Bafoussam and Foumban in the western highlands. Road links with the western region and neighboring countries are rudimentary.  APPENDIX I -5- 19. In West Cameroon, the road system of 1,600 km is by any standard extremely poor and inadequate. The tarred mileage represents barely 6iZ of the total. The rest are dirt roads and the condition of some of them is atrocious. Iiost all-weather roads are in the coastal region, which has relatively good road conditions, but the North and W1est have no all-weather link with the South except through the eastern part of the Cameroons. The system consists of a circular road in the South connecting Bota, Victoria, Buea and Kumba with branches to Tiko and Komborne. From Kuimba a main trunk road runs north to Namfe; a second trunk road runs north and east through the eastern region of the Cameroons to Bafoussam and Bamenda. ianfe and Bamenda are connected by a cross-country road which also extends west into Nigeria. Communications are in some ways better with Nligeria than with other parts of the Federation. 20. As will be apparent from the brief description of the road system above, the total mileage of roads and their general conditions are much better in the East than in the West. The development of the road system in the East has benefitted throughout the last decade from substantial investment by FIDES and its successor organization FAC, and more recently by contributions and loans from FED and AID. Very large sums have been spent on their im- provement and present plans provide for the completion of another 150 km of bituminized road this year and the improvement or reconstruction of major trunk roads, involving some 1,200 km. It is only in very recent years that roads in the West have been given priority for investment and almost 600 mil- lion francs CFA havebeen provided by C.D. & W. funds in the U.K. 21. The particular importance of roads and their contribution to the productive sector of the economy is well understood. Efforts have been made to provide the basic framework of sound, well-constructed trunk roads for which current maintenance costs can be kept within reasonable limits. Des- pite this, transportation costs and lorry depreciation remain exceptionally high. The construction of roads has to cope with the effects of the wet season, has to be undertaken in long stretches of mountainous forests, across deep rivers, and at the same time machinery and spare parts have to be brought long distances over poor roads. Once the load carrying capacity of roads has been increased, traffic tends to expand rapidly, and an improved road may carry as much as five times more traffic in five years. Statistics of merchandise handled by road transport are not available, and road vehicle statistics are not available before 1957. In 1957 the number of vehicles in use was recorded at 27,300. This figure has now risen to some 35,000, an increase of 25% in five years charactized by a notable slowing down of the rate of growth of the economy. 22. The Development Plan recognizes as the primary objectives for the development of communications (a) an improvement in the methods of evacuation of export products, (b) the distribution of import goods, and (c) the acceler- ation of the system of exchange within the domestic economy. The construction of the Trans-Cameroon railway introduces a new factor in formulating transport policy, not just from the point of view of extending the domestic railway system but more particularly as a means for serving the whole of the Chad  APPENDIX I -6- hinterland. Against this background, the Government's road policy has been formulated to take account of the folloving objectives: i) To channel on to the Trans-Cameroon Railway, through a network of roads radiating northwards from lN'Gaoundere, the maximum potential traffic; ii) To provide a modern north-south road axis; iii) The avoidance of potential competition between the main trunk road and the railway between N'Gaoundere and Tibati; iv) To provide a brake on freight rates on traffic utilizing the Benoue River and the port of Garoua and where neces- sary to provide an alternative means of transportation; v) To take into account the possibility of developing an economic region centered on Kribi and any consequent need to develop port facilities there, although the preliminary studies of the service of this region dic- tated a preference for a road outlet via Mbalmayo, the nearest railway terminal, and vi) The extension of the system of exchange and of domestic trade would be determined mainly by the development of secondary roads and rural feeder roads. 23. To the above objectives should be added a further objective whiclh may well be of primary importance in the short run, namely the need for rapid and comfortable means of cheap transportation between the West Cameroon and the East. Separated as these two regions are by different languages and different social and educational backgrounds and standards, the need for understanding and for a rapid and continuing exchange of views and improved communications is likely to prove of considerable importance to the effective integration and cooperation of the twqo economies and peoples. The importance of drawing together the North and South Cameroon has already been recognized by the priority given to the construction of the Trans-Cameroon Railway and the development of the road system radiating north and outwards from the main trunk road N'Gaoundere to Garoua and it would be lwise to give communications between the West and the East the same high priority and to maximize the existing large fund of goodwill in the relations between the West Cameroon and the Federal Government to overcome a number of potentially serious obstacles to integration before these can give rise to internal strains and bitterness. 2h. Provision is made under the present Development Plan for expendi- ture involving 11.3 billion francs on the improvement of roads and bridges. This has been broken down into 5.5 billion francs for the construction and improvement of main trunk roads, and 0.9 billion francs for secondary roads justified on purely economic grounds, and 3.9 billion francs for secondary roads justified on political or administrative grounds and a further 1.0  APPENDIX I -7- billion francs for roads of purely local or agricultural interest, half of which only would be contributed fromii official funds and the rest by local communities. Included in each amount is an element for preliminary and other technical studies. Although ample provision has been oade for the construction of secondary roads, it is disappointing to find that the greater part of the resources allocated for this purpose are reserved for the construction of roads which have primarily political or administrative justification. The import- ance of agricultural development and the expansion of agricultural exports has been emphasized sufficiently already and one of the principal obstacles to the further exploitation of existing resources and reduction in costs is the in- adequacy of feeder roads for the evacuation of prcduce. iviany of the admini- strative roads will, of course, contrioute indirectly to tiis end, but the existing scale of priorities does not appear to reflect adequately the pri- mary needs of the Cameroon. Airways 25. The principal airport of Cameroon is located at Douala. This inter- national airport, with two runways, one of wIiich is almost 10,000 feet in length, is served by modern long-range jet aircraft. There are several jet services each wieek to Paris and Brazzaville and piston-engine aircraft provide service to these same points as well as to other ,Jest African capitals, in- cluding Libreville, Gabon; Bangui, Central African Republic; Fort Lamy, Chad; Abidjan, Ivory Coast; Cotonou, Dahoney; Lome, Togo; Dakar, Senegal; and Accra, Ghana. There is also an extensive network of domestic flights linking Douala and Yaounde with N'Gaoundere, Garoua, i4aroua, Foumban, and Tiko, but airtrans- port has yet to play its full role in the development of the economy. 26. A sum of 600 million francs CFA has been allocated under the Plan for the improvement of runways and air traffic control.  APPENDIX II - 8- II. TRADE POLICIES 1. The structure of both internal and external trade is still dominated by a few foreign-controlled trading companiies who normally have their adminis- trative headquarters in Europe, those operating in East Cameroon being normally associated with France and those in the West with the United Kingdom. During the period of trusteeship, Cameroon's trade regulations were determined in accordance with the provisions of the Trusteeship Agreements and adhered to a large extent to the open door principle of non-discrimination in trade with other countries. On independence, however, Cameroon entered into Economic and Financial Agreements in November 1960 which further strengthened the trading and financial links with France. As a result of Cameroon's member- ship of the franc zone and of the Bank of Issue, the Banque Centrale des Etats de l'Afrique Equatoriale et du Cameroon, the Cameroon enjoys the French guarantee of convertibility of the CFA francs into francs and other franc zone currencies and the availability of foreign exchange to finance an agreed level of imports and other purchases from outside the franc zone. 2. The exchange regulations applied in the Cameroon are patterned on those of France with adaptations to meet local conditions and requirements. Whilst exchange transaction with other franc area countries are in general free, those with the non-franc area are subject to licensing. An Exchange Office controls the licensing of imports, the allocation of import quotas, the licensing of exports and the licensing of invisible and capital trans- actions. Settlements are made by commercial banks acting under the direction of and regulations imposed by the Exchange Office and these are brought to account in the general operating account of Cameroon with the Central Bank. Specific ceilings are established on total foreign exchange requirements but these have never been fully utilized and in case of necessity would be sub- ject to review by a Joint Committee of French and African representatives. It was claimed that the exchange control ceilings were not directly related to the import programs which Cameroon, along with other CFA countries, was originally required to submit to France for approval. However, the practice of making a formal submission as the basis for obtaining an official alloca- tion of foreign exchange has now given way to less formal arrangements involv- ing only a joint discussion of Cameroon's import program and foreign exchange requirements. The foreign exchange requirements of Cameroon appear to be determined in the light of an import program which providces for an upper limit on imports from outside the franc zone, and, either an upper limit on imports of a selected group of specified products from non-franc area countries or a minimum volume of imports of the selected group of specified products from France. In accordance with Cameroon's association with the Common Market and its membership of the Equatorial Customs Union, imports from member coun- tries are no longer subject to quota. Imports from all other countries are, however, subject to restriction and the allocation of import licenses. In Cameroon the Exchange Office claimed that there was in fact virtually no upper ceiling on imports from outside the franc area but, by contrast, the private sector appeared to consider the limits on the origin of imports to be particu- larly rigorous and restrictive.  APPENDIX II -9- 3. Exports to countries outside the franc area are subject to licensing to insure the registration of foreign exchange earnings and there is in gen- eral no restriction on their issue. A number of controls are, however, exer- cised on the export of certain commodities to France where a system of guaran- teed prices exists or where imports into France are subject to quota. 4. The operation of exchange control and the import and export licensing systems appears to have given rise to considerable hardship and criticism of partiality in the allocation of licenses. In the West Cameroons, in particu- lar because of that region's long association with the sterling area, imports have continued to be predoninantly from the U.K. and other sterling area coun- tries. These imports have, therefore, been completely dependent on the appli- cation of import licensing controls. In addition to the introduction of such controls, inadequate provision was made for the adrmLinistrative work involved in applying these provisions, and this tended to accentuate the scarcity of goods which has characterized the West Cameroon economy since independence. The system of import licensing was also the subject of considerable criticism in the East Cameroons where there exists evidence of a determined effort on the part of the authorities to channel trade in consumer goods through African traders. The system has produced some extreme examples of discrimination and ignorance of market operations, such as can arise when a large-scale importer finds his allocation of staple conmodities reduced overnight to a purely nomi- nal figure representing less than a week's sales and subsequently finds that a large proportion of the licenses which have been allocated to African trad- ers, have not been utilized owing to lack of capital, credit or a satisfactory credit standing abroad. 5. Following its independence, Cameroon entered into association with the European 3conomic Community and has subsequently signed the Second Con- vention of Association between the EEC and associated African countries. The new Convention is expected to become effective curing 196a. The terms of the new Convention of Association provZde for the removal of all quantitative restrictions and customs duties and the establishment of a free trade area between the EEC member countries and the associated countries. The new Con- vention provides for the progressive elimination of tariffs between the mem- ber states, according to a time-table varysing for each product or group of products. So far as Cameroon is concerned, imports into the Common Market of coconuts, coffee, tea, pepper and cocoa will be admitted free of duty as soon as the new Convention becomes effective. The quantitative restrictions on imports of tropical products into the Common Market countries including France will also be progressively removed and will effectively subject Came- roon exports to a greater degree of competition in the French market. The termination of the French system of support prices became inevitable follow- ing the agreements to eliminate all duties and quantitative restrictions on imports from other member countries of the Community and amongst the associ- ated countries. The serious impact on the economy of the Cameroon and other associated countries which would inevitably follow the loss of the closed and protected market provided by France was recognized, however, and the new Convention provides for increased financial assistance from the Community to the countries affected. Out of a sum of $230 million earmarked as financial assistance to help production and diversification and to assist associated  APPENDIX II - 10 - countries in progressively adapting their economies to selling exports at world market prices, Cameroon has been allocated $15.8 million. The elimi- nation of support prices is to be completed within the lifetime of the new five-year Convention, but special arrangements apply in the case of a num- ber of individual products. 6. The Convention also provides for the ending of any discrimination against imports from any individual EEC country. The associated countries retain the right to impose customs and fiscal duties for budgetary reasons and to protect pioneer industries and to assist economic development. The associated countries are also required to terminate all quantitative restric- tions against imports from EEC member countries, again subject to certain exceptions arising from the need to protect the balance of payments, indus- trialization, economic development or certain regional marketing arrange- ments for specified agricultural products. The associated countries are also free to impose any external tariff desired vis-a-vis other countries and to conclude customs union and free trade agreements with other associ- ated countries or other non-associated countries, provided such arrangements are made within the framework of the general principles laid down in the new Convention. In no case can an EEC member country be given terms less favor- able than those accorded to other countries. 7. Prior to the first July 1962 the Cameroons levied a series of duties on imports as an important source of revenue. These were the "Droits d'entree" and a "Taxe sur le Chiffre d'affaires a l'importation" (T.C.A.) and both were applied without discrimination to all but a few specified im- ports. The former duty was levied at rates varying from 0% to 29% ad valorem according to the nature of the products; raw materials and essential products were admitted at low rates up to 5%o, manufactured products at rates from 5 to 10%, finished products at 14%, and luxury goods from 16 to 29%. The turnover tax (T.C.A.) was at a uniform rate of 15%. Both of these duties were of a fiscal nature designed to provi.de revenue and contributed, in the 1961/62 budget year, over 50% of budget receipts. 8. lWith effect from the first of July 1962 the average "Droits d'entree" were raised from 14 to 20% and the turnover tax from 15 to 17%,. In addition, a new "import duty", or common external tariff (T.C.E.), was introduced addi- tional to the two previous duties. The import duty was introduced in conjunc- tion with the Equatorial Customs Union, of which the Cameroon became a member, and which provided for a common external tariff which cannot be modified uni- laterally. The external tariff is discriminatory, imports from the Common Market and from the 12 members of the O.A.M.C.E. group in Africa are not liable to import duties and, temporarily, imports into the West Cameroons from Great Britain are also permitted entry duty free. Import duties are charged at a "minimum tariff" or a "general tariff" (3 times the minimum), which is adinit- tedly designed to be retaliatory or punitive, and is not at present applied to any country. The rates of tariff are scaled according to products, from 0% to 30%. The common external tariff was designed to create a preferential system with those countries with which Cameroon had special ties and was to provide room for bargaining in negotiations with GATT. The "most favored nation" clause is held to apply to the minimum tariff only and not to the  APPENDIX II - 1i1 - preferential tariffs enjoyed by the Common Market and O.A.M4.C.E. member countries. 9. Special arrangements apply to imports into the West Cameroons for the time being. Customs duties are in general lowzer than the tariff of the Eastern Cameroons - approximately 60 to 655' of the latter. The temporary continuation of a separate system is necessitated by the existence of pref- erential markets for exports from the two federated states to Great Britain and France respectively, and the prior existence of two different levels of internal incomes, prices, customs duty and domestic taxation. These condi- tions necessitate a strict frontier control to prevent movement of commodi- ties enjoying preferences in one or the other state. The enjoyment of duty free entry of British imports also depended on the extension of preference to the West Cameroon's banana exports to Great Britain; this wias discontinued at the end of September 1963. 30. Relations with the Equatorial Customs Union were determined at the Bangui Convention in June 1962 which made provision for the regulation of trade between the Cameroons and the ECU and vice versa. Imports are allowed entry in accordance with the normal tariff except for those which are subject to an export duty from which they are henceforth exempt, being subject, however, to a new import tax. Raw materials other than industrial products are exempt from the Droits d'entree, and export taxes, but are subject to a uniform tax rate of 12%J over the T.C.A. These conditions apply only to a prescribed list of commodities subject to revision each year. Industrial products are subject only to this single tax when crossing the frontier if they are scheduled on the prescribed list. Rates of tax for the "tax unique" differ from product to product and from country to country and are levied at the point of retail sale. 11. The common tariff is not applicable to imports which are part of the exemptions permitted under the new investment code. The Equatorial Customs Union also envisages in addition to the unification of customs duties on im- ports a new code for levying duties on imports for investment purposes and a policy for harmonizing the investment codes and fiscal provisions existing in each member country. 12. Export duties are levied on an ad valorem basis on those products for wihich there is an active world market.  - 12 - III. INVESTI4EDT POLICY 1. The Federal Government has from time to time adopted measures de- signed to encourage the investment of foreign capital and to encourage the development of new industries. These were incorporated in an Investment Code approved by the National Assembly in 1960. The Code provides four main categories of fiscal exemptions and privileges to be granted to any new con- cern or new industrial or agricultural establishment qualifying because of its importance to the economic development of Cameroon. 2. Category (A) permits duty-free entry of machinery and equipment and industrial appliances, raw materials and packing materials for a period of five years, which can be renewed, and freedom from domestic consumer taxes for five years with an assurance that until September 30, 1980, such enter- prises will not be subject to any tax or new duty on imports, exports or domestic consumption. 3. Under category (B), enterprises would be entitled to the privileges accorded under category (A) and in addition freedom from taxation of indus- trial and commercial profits and real estate, mining and forestry royalties and exemption from land, mining or forest licences and dues for a period of five years. (Subject to further express authorization, normal depreciation allowances during this first five years can be deferred to the next three financial years.) 4. Certain other privileges under categories (C) and (D) of the Code are available to enterprises considered of particular importance to develop- ment. Enterprises enjoying privileges under category (C) would benefit under the terms of a Convention to be entered into with the Government to aid the establishment of a new concern; the Convention would be effective for a fixed neriod of at least 20 years. This Convention would define the general conditions of operation and the guarantees accorded by the Government, the formalities for extending, repealing or forfeiting rights, various safe- guards and the nature and extent of tax concessions granted under category (B). Various Government guarantees are to be given, namely a) Guarantees of stability in the judicial, economic and financial fields as well as such matters as the transfer of funds and the sale of goods; b) Guarantees of entrance and circulation of labour, of freedom of employment and free choice of suppliers and employees; c) Guarantees concerning the renewal of forestry and mining permits; d) Then applicable, guarantees as to the availability of water, electricity and other resources necessary for production, as well as the facilities for transporting products to the port of embarkation and the use of the facilities already existing or purposely created by or for the concern in that port.  Appendix III - 13 - 5. Category (D) makes certain provisions for enterprises of major importance for the economic development of the country involving heavy invest- ment outlays to enjoy the benefits of a stabilized rate of taxation for a period of 25 years at the most. 6. Provision is made for concerns enjoying any of these provisions to be exempt from the effects of any less favorable or contradictory legis- lation which may exist or may be enacted subsequent to the individual Con- vention. There are in addition certain provisions covering the enjoyment of some of these privileges by existing enterprises. Several enterprises have already benefitted from these privileges, notably Alucam, the aluminum concern, and Enelcam, the main electricity authority, under parts (C) and (D), the Bata shoe firm under part (B), and a number of other smaller enter- prises under part (A). 7. A Convention signed at 3angui in June 1961 provides for the regu- lation of economic and customs relations between the member states of the Equatorial Customns Union and the Republic of Cameroon. This Convention pro- vides for certain enterprises specified by Presidential decree to be granted automatic freedom from customs anid fiscal duties, such exemption to be offset later, wholly or in part, by a special tax applied to production. 8. Whilst the Cameroon appears to have attempted to provide a legal and fiscal framework designed to encourage private investment, whether domestic or foreign, within the country, it has still to demonstrate the spirit in which this legislation is to be applied. ,,That is still lacking in the Cameroon today is a feeling of confidence in the future and in the stability and good faith of the Government in its relations with private enterprise. Recent experiences of firms following the introduction of the new exchange control regulations, and of the actual application of a dis- criminatory policy in tlhe allocation of import licences, do not lend support to the view that private enterprise can rely on the Government to provide a favorable or even satisfactory economic environment. The existence of high discriminatory import duties against countries outside th EEC and franc zone and furtlhermore of a selective system of import quotas for goods originating out- side these twozonesand the relatively high income-cost structure vis-a-vis external prices are likely to present very serious obstacles to the entry of foreign enterprises, especially those with connections outside the franc zone. The nachinery of Government is also patently lacking in the administrative resources necessary to operate the existing rather elaborate and bureaucratic framework efficiently. 9. In addition, there is a tendency for the Government to wish to participate directly in investments in the private sector, the acknowledged interest in and pressure for Cameroonization even at the level of management for ixhich there are just not the necessary number of suitably qualified Africans, and the purely administrative difficulties of obtaining decisions and receiving the necessary permission, approval and guarantees from the several different agencies and departments responsible. The machinery for promoting industrial development and the establishnent of new concerns rnight also benefit from a streamlining and centralization of existing functions and procedures,  - 1 - IV. PRODUCTION, iMARKETING AND PROSPECTS OF PRINCIPAL EXPORT CROPS A. Introduction 1. The structure of internal trade in the Cameroon is still dominated by a few foreign-controlled general trading companies, which operate official buying agencies for export produce in the West Cameroon and to a limited ex- tent only in the East Cameroon. The purchase and transportation to the Coast or central buying points of the principal export crops produced by peasant farmers and in particular cocoa and coffee is usually handled by marketing cooperatives who sell to the more specialized export merchants in the East Cameroon and to the Produce Marketing Board in the West. The export of plantation produce is usually handled directly by the producer. In both the East and lWSest Cameroon timber exports are handled by the actual producers and bananas by a French and British company, respectively, specializing in the export, shipment and distribution in the European markets, on an agency basis. 2. Dissatisfaction with certain aspects of the activities of the cooperatives, lack of experience and managerial ability, too rapid Africaniza- tion and general loss of impetus have contributed to the recent establishment in East Cameroon of a new marketing agency to be responsible for the marketing of all agricultural export produce, initially through existing export channels but with a longer term objective of selling directly to overseas markets. 3. World markets for Cameroon exports have been primarily France and Britain. Certain agricultural products exported from the East Camreroon have enjoyed special privileges in France, entering the French market duty-free under cover of protective ad valorem duties against imports from other countries, 9% for cocoa, 18% for coffee, 20%o0 for bananas and 9% for palm oil. In addition to the preferential duties, France has guaranteed minimum prices for a number of commodities up to a limited quota and has also subsidized the production of cotton. It is not possible to assess the full value of the benefits to the Cameroon, but an attempt has been made to estimate the direct financial gain accruing to the Cameroon as a result of the differences between the level of world market prices and French market prices. Details of this are given in Table 23. The total gain for 1961, the latest year for which full details are available, is estimated at 2.0 billion francs CFA or $8 million. 4. Stabilization funds have been progressively set up in the Cameroon in order to guarantee relatively stable producer prices. The stabilization funds have for the most part been established simply for the purpose of stabilizing prices and are seldom operated in connection with the marketing of export produce. The stabilization funds are financed from levies imposed on exports to France and from a share of the governmental duties on exports. They may also obtain loans from FNRCPOM (Fonds iHational de R6gularisation des Cours des Produits d'Outre-Mer), which obtains its resources from the French budget when market prices are below the intervention prices fixed by the FNR for the French market. The stabilization fund fixes the miniraum prices to be paid to producers. These prices in general reflect the trend of world market prices but avoid or attempt to avoid abnormal fluctuations.  APPED(IX IV - 15 - Due to favorable world market prices in the past, the cocoa stabilization fund has accumulated important surpluses and, largely as a result of prices enjoyed in the French market, the coffee stabilization fund is also operated with substantial surpluses. 5. The Cameroon Government also levies ad valorem export taxes on almost the whole range of the principal export commodities: Bananas 17% Cocoa 17% Coffee 7% Cotton 7% Groundnuts 7% Groundnut oil 6p Palm kernels 8$ Palm oil 6% Logs 12' Sawn timber 12%J Tobacco 10% Rubber 5s Hides & Skins 2% 6. As a result of its association with the EEC, the Cameroon has enjoyed the benefit of a larger market, with similar preferential duties against non- associated countries to that enjoyed in the French market. In terrr.s of the Second Convention of Association initialed in December 1962, signed in July 1963 but still subject to ratification by the EEC member states and at least 15 associated countries, the member states of the Community and the associated countries will form a free trade area within which all movements of goods will, in principle, be free of restrictions and customs duties. The associated countries, including Cameroon, will however retain their freedom to vary tariffs vis-a-vis third countries. The Cameroon should benefit from the pro- gressive elimination of tariffs between the member states and in the case of coffee, tea, pepper and cocoa the elimination of duties will be accelerated and these products will be admitted free of duty writh effect from the date the new Convention becomes effective. On the other hand, any discrimination between the six member states is proscribed under the terms of the new Convention, although Cameroon, like other associated countries, will have the right to impose fiscal customs duties to protect her industry and economic development. 7. Similar arrangements exist for the progressive elimination of quantitative restrictions and support prices, which will make it impossible for France to retain a closed and protected market for tropical products. The serious impact on the economies of the associated countries likely to follow the loss of such a highly protected market was recognized, and the Convention therefore provides that the countries affected should be compensated by increased financial assistance from the Commnity. Out of a suIm of :p230 million earmarked as financial assistance to help production and diversification, on this account alone, 215.8 million has been allocated to the Cameroon. This aid is meant to assist the associated countries in progressively adapting their economies to selling exports at world market prices.  APPENDIX IV - 16 - 8. The elimination of support prices is to be completed within the life- time of the new five year Convention. As far as Cameroon is concerned, trading in palm oil and. cotton at world prices wi]ll start at the beginning of the 1963-64 harvest year, oil seeds and oils not later than the beginning of the succeeding crop year. For coffee the reduction in support prices will take place in annual steps at rates ranging between 15-35% of the difference between French market and world market prices. Bananas are the only major tropical commodity excluded from the provisions of the Convention and the Price support and outlet guarantees for bananas will continue. 9. If 1961 can be regarded as in any way typical, the new Convention of Association with EEC appears to impose a very substantial loss in export earnings, estimated at !p8 million in 1961, as a result of the elimination of the French system of support prices. The amount of assistance, 415.8 million, to be provided to assist production and diversification to make good this loss represents only the equivalent of two years' premium, and there appears to be little prospect that the Cameroon could expand her output and exports of existing crops or develop alternative sources of export earnings within two years. B. Cocoa 10. The most important export crop, cocoa, is cultivated throughout the tropical rain forest which covers the southern part of the Cameroon. FolloW- ing the high prices of cocoa in the post-Korean years, the area under cocoa doubled and now amounts to over 550,000 acres; the original acreage hcwever was established before 1940, much of it as far back as 1920. Production is carried out almost entirely on small family farms where cocoa plants are inter- mixed with bananas, manioc and oil palms. There are believed to be between 180,000 and 200,000 cocoa planters. The crop area per planter averages less than 3 acres, 11. During 1950-1963, total annual production has risen from 50,000 to 75,000 metric tons, output in the last three crop years being 1960/61 East 70,000 West 8,000 Total 78,000 Domestic 8 1961/62 63,400 4,200 67,600 Consump- 9 1962/63 (68,000) (6,000) (74,000) tion (10) Yields of 1,000 pounds per acre are possible, given consistently good standards of farming, which are however rare, but average output remains only 350 pounds per acre. MIuch of the increase in the number of cocoa trees following the 1954/55 boom in cocoa prices was achieved by crowding cocoa plants among other crops such as bananas and manioc. 12. In general, although the Cameroon is the fifth producer with 6pA of total world production, its cocoa is of very poor quality and it has suffered from inadequate disease control and intermittent Government measures for improving the quality of the crop and for ensuring that adequate farming methods were maintained. The standard of cultivation and quality appears to be steadily deteriorating, (in 1962, 23,o was of superior quality and in 1963 only 13%), and it is feared that in the absence of a renewed and energetic  APPENDIX IV - 17 - program of rehabilitation, Cameroon's cocoa wcuLld continue to decline in volume and quality and would soon fail to find a mrarket. Spraying, intensive cultivation methods, cutting out of diseased trees and extension measures have been successful in the past and there is every reason to believe that a large-scale continuing program would be even more effective in increasing yields per tree and in improving the quality of the cocoa. 13. The Government is at present considering a scheme involving a request for I.D.A. assistance and providing for a renewed campaign for disease control and rehabilitation measures, with the object of raising output to some 90,000 tons per year, the improvement of secondary feeder roads and provision of transport for the evacuation of produce, arrl the establishment of a "marketing board" scheme for the centralized purchase and export of the crop. The pro- posed marketing scheme also envisages the continuation and improvement of the present scheme for stabilizing prices to the producer. The Government's final proposals have not yet been completed but there appears to be some reluctance on the part of the Government to accept the full implications of a stabiliza- tion policy or to make full use of domestic resources in the form of existing stabilization funds and domestic credit resources, and to use any windfall profits to assist in financing the disease control and rehabilitation measures. 1h. For several years the cocoa price has been sufficiently high to permit a surplus to be accumulated in the cocoa stabilization fund, but in 1960/61 726 million francs CFA had to be paid out and in 1961/62 a further 323 million francs to maintain the present producer price of 70 francs CFA per kg; but in view of the Cameroonts low productivity and consequent high costs, it is doubtful whether the fund will be able to continue to maintain prices above the costs of marginal producers if world prices decline further. 15. In order to utilize somie of the increasing tonnages of poor quality cocoa, a local cocoa butter industry has been developed wJhich presently absorbs some 9,000-10,000 tons per year. The balance of the crop has been exported. The Cameroon has experienced increasing difficulty in maintaining an export figure in the neighborhood of some 65,0Co tons per year and in the absence of any rigorous rehabilitation program it promises to be extremely difficult to maintain this export figure in the future. Due to the difficulty of developing and expanding a program of disease control and rehabilitation and the relatively slow rate of return, it is even doubtful whether Cameroon could expect to enjoy any increase in exports within the next five years, even given the rapid build-up of a comprehensive program of rehabilitation pursued with the utmost vigor and the maximum of resources. An added uncertainty stems from the possibility of an interna-tional cocoa agreement being accepted and implemented during this period. If such an agreement were to materialize the Cameroon export quota might well be restricted to a figure of barely 65,000 tons per year plus an annual increase of some 3%, subject of course to the Cameroon's being able to demonstrate its ability to meet this expansion target. This would set an upper limit of about 75,000 tons by 1967, which is sti: most unlikely of achievement. 16. Cocoa exports have been sold in general at open market prices without any special support on the French market other than that accorded by the existence of an intervention price designed to limit the extent of short-term fluctuations. The Cameroon may succeed in expanding its export to the LEC  APPENDIX IV - 18 - under cover of the new external tariff of 5.h40, which is somewhat lower than the protective tariff of 9% hitlherto enjoyed on exports to the French market. World market prices are assumed to settle somexch-ere in a range of 20-25 cents US lb. CIF by 1967. 17. On this basis, a conservative forecast of exports in 1907 amounts to 70,000 tons, valued at 7.4 billion francs. C. Coffee 18. Coffee production has increased five-fold during 1950-60, from about 8,000 tons to some 40,000 tons, and now ranks second among the Cameroon's agricultural exports. Output is still increasing despite serious marketing problems stemming from the world surplus of coffee. 19. Although thle Robusta variety continues to predominate, the Cameroon produces a substantial amount of the Arabica variety which commands a much higher price and is much easier to market. About 8,000 tons, or one-sixth of the Cameroon's total coffee production, is now of the Arabica variety which is growm in the higher altitudes in the western part of the country in the Bamileke, idungo, and Bamoun areas. Robusta, on the other hand, is produced at lower altitudes throughout the southern part of the country, except in the coastal areas. 20. The production of Robusta coffee, by crop years, was, in tons: average for 1950/51-1954/55 11,coo; 1957/58 25,000; 1958/59 27,000; 1959/60 27,000; 1960/61 33,000, and 1961/62 30,000. Most of the in- creased yield results from an addition in acreage devoted to coffee from 119,000 acres in 1956 to 176,000 acres in 1959. To the above production figures must be added some 2,000 tons of Robusta producted in Jest Cameroon, about 5,000 tons of Arabica in East Cameroon and 3,000 tons in West Cameroon. 21. The yield per acre of coffee in the Cameroon appears to compare favorably with that in other African countries. Robusta yields range from 300 pounds per acre on small plantations, accounting for about 80- of total output, to 900 pounds per acre on the few large, well-organized plantations (usually owned and managed by Europeans). Yields of ikrabica are far lower, ranging from 90 to 180 pounds per acre on African-owned farms to 250 pounds per acre on large plantations. The great diversity in coffee yields would indicate that it should be possible to raise output substantially without increasing the acreage now devoted to coffee. The Government's extension service is urging coffee planters to extend the shading of plantations, in- crease the use of fertilizers, reduce the inter-mixing of subsistance crops in coffee plantations, trim coffee plants more thoroughly and more regularly, and increase measures against parasites. 22. France provides a guaranteed market and also purchases Cameroon's coffee at prices some 60,! higher than world market prices. However, in recent years the output of coffee in the franc zone has exceeded Francets  APPENDIX IV - 19 - coffee consumption so that the Cameroon, like other franc zone coffee producers, has had to look elsewhere for new markets for a Dart of her output and exports to France have been subject to quota. The reduction in support prices pro- vided for in the new agreement w4ith the EEC is to be completed in annual and progressive steps before mid-1967. 23. Coffee production has enjoyed a remarkable expansion in the last decade, but it is difficult to see any prospects for a similar expansion in future. The Careroon basic long term export quota under the five-year International Coffee Agreement is 45,000 tons and even with the development of more orderly marketing it is unlikely that some fall in coffee prices can be avoided; this may be as much as 2-1/2 per cent. The Coffee Agreement requires the Cameroon to limit its exports in the short term to 38,000 tons and to hold the excess tonnage off the market; stocks are new only 2,500 tons but the annual carry-over has been for some years about 10,000 tons. The long term quota for Cameroon is 4',000 tons and it seems orobable that this could be effective by 1967 if the Agreement is successful in its objectives. 24. Coffee exports have therefore been forecast at 45,000 tons which, at an ex-nected world price of 21 cents US lb. would yield 5.Q billion francs CE-A. D. Bananas 25. Bananas are produced in both parts of the Federation. Production in- creased rapidly in the years immediately following 7orld Tar II but remained steady, apart from the effects of storm damage , at around 185,000 tons in the period 1955-59 and then declined. Today, approximately 75,000 tons of the Gros I1ichel variety are produced in East Camneroon, some 30,000 tons by planta- tions and the remainder by peasant farmers, a further 40,000 tons are produced on the plantations of the C.D.C. and Elders & Fyffes in the i4est and another L5,COO tons approximately, again mainly of Gros Kichel variety, are produced on peasant holdings also in the Wlest. Production has suffered seriously from the prevalence of Panama disease ard soil deterioration, reinforced by very poor farming practices and as a result the quality of the bananas produced on peasants' holdings in both the East and the West has deteriorated Sigai- ficantly in quality, although it has never been entirely satisfactory for dis- posal on world markets. Production in the East has also been seriously affected by the terrorists' activities which were mainly lccated in the banana region and exports from East Cameroon fell from a peak of 85,000 tons in 1957 to less than 40,000 tons in 1960. 26. The Gros Michel banana which forms the backbone of peasant farming is disease-prone and particularly vulnerable to storm damage. Promising progress has been made on the plantations of the 'Vest to develop a disease-resistant variety with high yields suitable for planting in planned cycles, which permit harvesting at pre-planned dates coinciding with the peak periods of market demand. This type of cultivation, however, involves a fairly rigorous control of seeding, planting and a more intensive method of farming than seems possible to adopt generally on peasant holdings. On any impartial assessment, it is  APPENDIX IV - 20 - doubtful whether the standards of quality and problems of production to be over- come in the production of bananas on peasants' holdings can justify any optimism in the long-term future of this crop without a radical re-development program. 27. Apart frorm the production problem, haoever, there is the question of markets. Banana production without clearly defined markets in view is likely to be most unsuccessful and recent developments in the Cameroon's principal markets, the U.K. and France, have further jeopardized the future of this crop, especially the part produced by peasant farmers. 28. Miviarket preferences are high and extremely inelastic, as recently evidenced by the difficulty of disposing of Eastern Cameroon produce on the German market. The bananas from the Eastern Cameroon are restricted at present to a fixed quota of the French market, the amount being determined by the Comite Tnterprofessionnel de Banarese, which determines the share of French African countries in the quota allocated to them for sale on the French market. The bulk of France's needs being met from the Antilles, this quota is at present fixed at some 125,000 tons. As a result of recent representations, the quota was raised for 1963/64 to 132,000 tons, the Cameroon's share of 45,000 tons in 1962/63 being raised to 52,000 tons for 1963/64. The total quota for African countries, however, represents less than a quarter of the total output of French African producers and it is unlikely that this quota can be significantly increased. Exports to France, nevertheless, benefit from a guaranteed price, which has hardly varied since 1955. 29. Until September 30, 1963, the produce of the West Cameroon enjoys an imperial preference equivalent to